'Trophy Building' Asking Rents Climb Higher

Despite increasing vacancies and a decrease in leasing activity, asking rents in Manhattan's premier office buildings rose significantly versus last year, according to a report from Jones Lang La-Salle.

Average asking rents for downtown "trophy buildings"— which the firm defines as those in high-profile locations built or significantly renovated since 1985 and housing a prominent tenant — rose to $68.94 a square foot from $52.10 in the fall of 2006, a 32.3% increase, according to the brokerage firm's annual "Skyline Review." Trophy buildings in Midtown saw average prices rise to $119.41 a square foot from $93.25, a 28.1% increase, the report said. "Manhattan continued to see strong activity this year," the president of Jones Lang LaSalle's New York office, Peter Riguardi, said in a statement. "New York remains one of the most important centers for business in the world. We expect to see continued upward pressure on rents as tenants continue to chase the city's limited supply of office space."

A generally tight supply of high-end properties and demand from financial services companies — which accounted for 26% of all activity in Manhattan during the period — is pushing up prices, the report said. This could make the high-end property market more vulnerable in a worsening economy because financial companies tend to quickly unload extra staff and space during downturns.

Despite uncertain economic outlooks for 2008, the report concludes that "while market cycles may allow for short-term reductions in pricing, longer-term fundamentals point to higher rents." The report tracks activity at 58 buildings in the city, including such landmarks as 30 Rockefeller Plaza, 9 W. 57th St., and 7 World Trade Center.